The European Communities (Consumer Credit Agreements) Regulations 2010 provide a framework within which lenders in the European Union must operate. The evaluation of a credit application by a lender must include an assessment of the consumer’s creditworthiness on the basis of sufficient information. However, the extension of credit by lenders to potential customers remains a commercial decision for the lender.
The European Union (Consumer Mortgage Credit Agreements) Regulations 2016 (‘the Mortgage Credit Regulations’) transpose the Mortgage Credit Directive and came into effect on 21 March 2016. The Mortgage Credit Regulations apply to a credit agreement that came into effect after 21 March 2016.
Part 6 of the Mortgage Credit Regulations states that before concluding a credit agreement, a creditor shall make a thorough assessment of the consumer’s creditworthiness. That assessment shall take appropriate account of factors relevant to verifying the prospect of the consumer being able to meet his or her obligations under the credit agreement.
Part 9 of the Mortgage Credit Regulations deals with ‘foreign currency loans’. The Regulations define a “foreign currency loan” as a credit agreement where the credit is:
(a) denominated in a currency other than that in which the consumer receives the income or holds the assets from which the credit is to be repaid, or
(b) denominated in a currency other than that of the EEA Member State in which the consumer is resident.
While the Regulations provide a framework within which creditors must operate, including such matters related to exchange rate risk, the extension of credit by creditors to potential customers is a commercial decision and is not precluded by the Regulations.
The EU treaties provide for the free movement of capital and services between EU Member States. As part of this EU common market for financial services, the “passporting” provisions in the Capital Requirements Directive IV (as transposed in Ireland through the European Union (Capital Requirements) Regulations 2014 - SI 158/2014), enable a licensed credit institution in another EEA jurisdiction to offer banking services/products to Irish residents. (In this context it should be noted that all Central Bank consumer protection requirements apply equally to credit institutions ‘passporting’ in from another EEA member state as they do to an Irish incorporated credit institution.) Likewise, there is no general restriction on Irish residents obtaining banking services/products from non-Irish credit institutions.
Additionally, credit unions cannot do businesses with the general public and as such only extend credit to their members. As per Section 6(1) of the Credit Union Act 1997, membership of a credit union is restricted to persons who share the common bond of that credit union, which is founded on a pre-existing social connection, such as belonging to a particular community, industrial or geographic group.